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Rolling your capex into your maintenanceApr 08, 2007


What are the implications?

(1) Maintenances are based on routine expneses.
(2) CapEx is a variable expense based on the needs of your builidng based ideally on a schedule.

The most adverse impact of rolling maintenance and capex into one budget would be that maintenance will swing dramatically from year to year.

If your new roof will cost the co-oop $200,000, but next year the isntallation of the new boiler is $110,000, your maintenance will have to fluctuate dramatically to cover the requirements of the capex. Thus, it would be difficult for shareholders to sell an apartment whose maintenance depends on the capital improvements that are projected that year.

This is why operational expenses are separated from capital improvements. To provide a better balance between expected expenses and expenses that require planning, reserves, and other forms of financing.

If you were to look at any annual report or 10K of any publically traded company, capex is a separate table in your presentations and are not rolled into the income statements of the co-op.





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